No matter how public-spirited and community orientated a property developer is, he is likely to have to battle with a perception held by members of every community, that he is ruthless or uncaring, says Marius Halgryn, Land Acquisition and New Business Manager for Rawson Developers.
Over the years, says Halgryn, this image is likely to improve provided that the developer acts ethically and always with the support of the majority of people in the community – but, he says, it will often crop up again when the developer goes in search for land.
“Many landholders,” says Halgryn, “have never dealt in property as a business. They may have inherited their land or they may have acquired it as part of some other deal. When, after many years of holding onto it, they decide to capitalize on their asset by developing or selling it, they frequently have no idea of the difficulties and lengthy time periods required in this process. Believe me, it is not easy to get all one’s ducks in a row for a new property development – and I am talking from 27 plus years’ experience.”
Typically, says Halgryn, the developer on the hunt for new land will either approach or be approached by the landholder – who will then very often begin to foster high hopes of monetary gains on his property. He will almost certainly not realize the many phases that have to be worked through.
The first of these, says Halgryn, is that the developer has to check the zoning rulings which apply to the land (in Rawson’s case they will generally be looking for land zoned residential or commercial). Although these are not always cast in stone and it is often possible to get a property rezoned, this can be a long and difficult process on which there may be no guarantee of ultimate success – especially if objectors crop up with apparently sound reasons for disliking the rezoning.
In the next stage, says Halgryn, the developer will have to check what town planning regulations apply to the site and he will have to study these along with the title deeds and the Surveyor General’s diagram. It is quite possible, for example, that the site may be subject to a servitude or a public right of way or may be prevented from ever being sub-divided or having buildings above a certain size and height. All these conditions have to be checked out.
Also needing careful checking, says Halgryn, will be any environmental constraints that may apply to the property. If, for example, it is within 32 metres of a river, building will not be allowed (anywhere in South Africa) without an EIA (Environment Impact Assessment). Similarly, if there is any danger of interfering with nearby water resources, great care will have to be taken to ensure that this is not possible.
Having, possibly with some luck, passed these initial tests, the developer will also then have to check for any heritage rulings that may affect the property. A surprising number of sites in South Africa, says Halgryn, are subject to heritage laws because they are historic, 60 years and older or it might just fall within the Heritage Conservation areas demarcated by the city.
If, after all these checks, the proposition still appears to have potential, the developer will then take the first step towards actually planning his new project. This will involve doing an initial rudimentary conceptual design and a financial viability study.
At this stage the developer will also have to approach the banks to ascertain how they would view such a scheme, what modifications or changes they might insist on and what conditions would apply to any loan given. These conditions, says Halgryn, can be onerous these days. The developer may well have to come up with guarantees from a third party (which are particularly difficult to obtain today) and/or to achieve very high pre-sales figures, in some cases of 60% or 75%.
If the developer still feels that he can go ahead with reasonable certainty of making a profit, he will have to put in a firm offer to buy the land (the tentative price will have already been agreed on) and will then have to instruct his architect to complete the designs and submit them for the local authority’s approval. At this point he will also once again have to appeal for objections, which can hold up schemes for many months on end. If he is far-sighted, he will also at this stage probably start launching his sales campaign, which, in view of the advertising and the staff involved, can be a very expensive process.
The seller who understands how complicated this whole initial negotiation, design and approval process, says Halgryn, will also probably understand why it can take this long. In addition, he will comprehend why, although a firm like Rawson Developers look at two or three new proposals each week, they reluctantly find themselves unable to go ahead with more than 5% of them.
Halgryn says that he hopes, very sincerely, that this explanation of the lengthy initial steps that have to precede any major property development will now be better understood, especially by potential landholders thinking of approaching a developer.
“It has never been easy to get a new project launched,” he says, “and the plain truth is that developers have to be some of the most persevering people in the entire construction sector, but I do hope that this setting out of the process will actually encourage certain people currently sitting on land to consider its potential and to approach us or some other developer. At this stage in South Africa’s economic history, far too few new projects are being launched, to the detriment of the entire residential sector.”
